DraftKings and FanDuel Merger No Longer a Fantasy: The Reality Behind the Story

After much speculation, the merger between Daily Fantasy Sports giants FanDuel and DraftKings has officially been announced.

News broke Friday morning that the two companies had agreed to terms, and while standard regulatory approval remains pending, the two will join forces before the 2017 football season kicks off.

While official terms have not yet been made public, ESPN is reporting that both companies should have equal shares in the business. Both will have three representatives on the board, with a single independent director, with DraftKings CEO, Jason Robinson, serving as the Chief Executive Officer, and FanDuel CEO Nigel Eccles taking on the title of Chairman of the Board. There has been no announcement as to the name of the company.

Signs of a Damaged Industry?
While both companies are chalking this up as a positive move for the advancement of “paid fantasy sports”, the timing of this decision does lead to the speculation of a declining industry. 2016 has had its share of hurdles for most products related to the NFL, as viewership was reported to be down 14% heading into Week 9 of the season. While Week 10's Monday Night Football matchup between the Cowboys and Steelers received the highest MNF rating in five years, it doesn’t mask the fact that the overall interest and passion for “America’s sport” has declined.

Similarly, the Nevada Gaming Commission has reported year over year decline in overall football betting action, coming in $6 million short when comparing 2015’s and 2016’s Week 8 earnings. It is also worth noting that the numbers reported by the NGC are compiled from all sports, but sources inside of the casinos have openly stated that the losses can mostly be attributed to the NFL product losing steam.

Offshore sportsbooks tend to be a bit more tightly lipped when it comes to reporting their earnings and overall money wagered each week, but it is a safe assumption that this overall “decline of interest” is sending shockwaves through all industries that rely on the NFL’s popularity to turn a profit. With NFL executives pointing to the presidential election as the main factor behind these reports, the same time-frame shows little to no decline in the viewership and money being taken in on College Football games.

Like most casinos and sportsbooks, DraftKings and FanDuel have always relied on the NFL season to be their most profitable season of the calendar year. Add that to last year’s scandal, which involved employees using inside information to turn the game in their favor at competing platforms, and one only had to expect that 2016 would prove to be a difficult year for the DFS industry.

What’s Next?
Fantasy sports was always intended to serve as the modern man’s version of the Baseball Card. Groups would compile stats and combine that with insight and perception to put together the perfect collection of players to outperform a team built on a fair and just drafting system.

The rise of DraftKings and FanDuel has somehow taken this love for sports and knowledge and turned it into a game of chance and money. As Newsweek called it, “Roulette for Bros”. In attempts to outspend, out market and offer larger prizes, the two sites could have actually excluded the true fantasy player more so than include them into their client base, a move that could eventually lead to their demise. By joining forces, the two need to bring things home and make it about sports again rather than some sort of scratch off lottery ticket.

With an estimated 40 million fantasy players already taking part of season long fantasy competitions (compared to the 5 million who partake in daily fantasy contest), these industry giants have largely relied on the daily competition format to appeal to those in search of an instant reward. Merging will allow the both companies to put their heads together to battle legislation and find ways to tap into this season long player that is yet to test their product.

While each company has approached the legal backlash differently, it will be interesting to see if this merger will see them take the more aggressive DraftKings approach rather than the more passive stance taken by FanDuel.

In a discussion with SBR, Peter Kahn, President of Hardwired Marketing Group, and PR representative in the sports betting realm added "I feel this merger and reorganization of sorts is only going to help keep the conversation of legal sports betting across the United States alive. There's still no guarantee that daily fantasy will be sustainable. Only time will tell. The one thing I can tell you is that the massive casinos you see in Las Vegas on the strip weren't built because people are winning."